A bold economic theory on why panhandlers should act more like registered charities

By Leslie Albrecht

Published: Jul 29, 2017 7:32 am ET

Giving money to others boosts our happiness, but only when we know we’re making an impact

Economists say they have a way for panhandlers and donors to make “mutually beneficial deals.”

New York City Mayor Bill de Blasio recently said that New Yorkers shouldn’t give money to panhandlers and that some people panhandle for “fun.” But researchers who have studied panhandlers think it’s more complex than that. In fact, they think panhandlers could benefit from being certified, similar to the way personal trainers are.

Why? Think of panhandlers and their potential donors as parties who want to make a deal, said Brendan O’Flaherty, an economist at Columbia University, who has studied panhandlers in Manhattan. Those deals can’t happen because people who want to give spare change to a needy recipient don’t know which panhandlers are truly destitute and which are scammers, O’Flaherty said. (One study in San Francisco found that among the things panhandlers spent their money on, 94% bought food and 44% bought drugs or alcohol.)

None of the panhandlers O’Flaherty and his co-authors interviewed in Manhattan were faking their poverty, O’Flaherty said. O’Flaherty and his fellow researchers defined panhandlers as people who ask for money and offer nothing of value in return, so they didn’t consider street musicians to be panhandlers. They also pointed out that not all panhandlers are homeless, even though the two groups are often lumped together.

A credentialing system where reputable nonprofits could certify individual panhandlers and potential donors could quickly identify them could help the two parties find each other and do business, O’Flaherty and his co-authors suggested in a paper earlier this year.

“The market has a serious problem,” O’Flaherty said. “There are probably a bunch of these mutually beneficial deals that aren’t happening because people don’t know who is a good panhandler.”

O’Flaherty and his co-authors say an app could be one solution. Panhandlers who have been vetted by nonprofits would be assigned identification numbers that they would display on their signs. Potential donors could look up the panhandler on the app to see a photo of them and verify that they’re credentialed, then tap to make a donation. Most panhandlers carry phones, O’Flaherty and his co-authors found, so the app could inform the panhandler of the donation. The organizations doing the certifying would decide what criteria a panhandler would have to meet to get credentialed.

‘Mosques could certify panhandlers who are observant Muslims, other groups could credential panhandlers who are sober’

Brendan O’Flaherty, an economist at Columbia University

“I could see a world where just as there are different personal trainer certifying groups, there could be different panhandler certifying groups,” O’Flaherty said. Mosques could certify panhandlers who are observant Muslims, other groups could credential panhandlers who are sober, he said.

A Seattle startup launched a version of the credentialing idea last year with an app called GiveSafe (now called Samaritan). It notifies users when they walk past a homeless person who’s wearing an electronic “beacon.” The app provides the user with the story of how the homeless person ended up on the street. The user can make a donation that the recipient can only use for essentials such as “bus fare, groceries, a haircut or storage locker,” King 5 News reported. Panhandlers must attend counseling once a month if they want to keep their beacons.

Of course, a certification system only works if panhandlers are willing to be identified and photographed. National Coalition for the Homeless interim director Megan Hustings said cities sometimes suggest licensing panhandlers as a way to control them, but those policies do more harm than good. It takes time to get a license, but panhandlers are usually asking for money to meet an immediate need, she said.

But O’Flaherty and his co-authors predicted in their paper that certifying panhandlers could help them make more money and improve their overall welfare. And a certification system could also enhance the “warm glow” that donors feel after they give, they said.

“Sometimes our work is taken as evidence that if you empty your wallet you will be happier, but it’s not some Marie Kondo magical process thing,” Dunn said. “It has to be under the right conditions. One of the key conditions is the extent to which you can readily envision the impact your donation is having for the recipient.”

That’s why people get a bigger emotional reward after giving to charities that explain exactly how their donations affect someone’s life, such as a group that uses donations to buy mosquito nets to protect families in Africa from malaria, Dunn said. Donors felt less of a happiness boost after giving to charities with more nebulous missions, such as helping children in developing countries, Dunn’s research has shown.

Dunn hasn’t studied panhandling specifically, but said some of the same feelings could apply when giving money to strangers on the street and a credentialing system could possibly help with that.

“There’s always that worry, ‘What if this is just a teenager trying to get money for an iPhone?’” Dunn said of the emotions some people feel when deciding whether to give to panhandlers. “Those kind of concerns could seriously undermine the emotional benefits of giving.”